Treasury yields rose on Friday as investor fears grow that rate cuts from the Federal Reserve may not take place after all, as the war in the Middle East drives inflation higher.

The 10-year Treasury yield — the benchmark for U.S. government borrowing — added 10 basis points to 4.38%. The 2-year note yield — which is more sensitive to short-term Fed rates decisions —traded at 3.932%, up 10 basis points as well.

One basis point equals 0.01%, or 1/100th of 1%, and yields and prices move inversely to one another.

The moves come after Iran and Israel exchanged strikes overnight, while Iran also launched new attacks against energy sites in the Gulf. As the war weighs heavily over markets, investors are now positioning for a slightly more hawkish stance from the Fed as higher global oil prices and renewed labor market uncertainty shape the economic backdrop.

Inflation was already trending above the Fed’s target even before energy costs spiked at the outbreak of the conflict on Feb. 28. The Fed’s rate-setting Federal Open Market Committee voted 11-1 on Wednesday to leave its key interest rate unchanged, a move widely anticipated by investors.

“The backdrop domestically is less friendly than it was a couple weeks ago too, because the Fed has kind of reversed course. The market has removed basically every rate cut from this year, and now is pricing odds of the hike,” Baird investment strategist Ross Mayfield said to CNBC.

Central banks in Europe also held rates steady on Thursday as policymakers grapple with the impact of the war, with markets now pricing in rate hikes this year.

Oil traded lower on Friday, with U.S. West Texas Intermediate prices sliding 1.2% to $94.99 a barrel, and Brent crude, the global benchmark, down 1.3% to $107.28.

The dip comes after Treasury Secretary Scott Bessent indicated that sanctions on Iranian crude stored aboard tankers could be lifted to help ease price pressures. Israeli Prime Minister Benjamin Netanyahu said his country was assisting the U.S. “in intel and other means” to try and reopen the Strait of Hormuz.

Anthropic CEO Dario Amodei is back at the negotiating table with the U.S. Department of Defense after the breakdown of talks on Friday over the use of the company’s AI tools by the military, according to The Financial Times. 

Amodei is in talks with Emil Michael, under-secretary of defense for research and engineering, in a last-ditch effort to reach an agreement on the terms governing the Pentagon’s access to Anthropic’s Claude models, the Times reported, citing anonymous sources with knowledge of the matter.

Discussions fell apart Friday, with President Donald Trump directing federal agencies to stop using Anthropic’s tools, and Defense Secretary Pete Hegseth saying he would designate the company a supply-chain risk to national security.

Last week, Michael had attacked Amodei, calling him a “liar” with a “God complex,” in an X post.

Agreeing to a new contract would enable the U.S. military to continue using Anthropic’s technology, which has reportedly been utilized in Washington’s war with Iran. 

Claude became the first major model deployed in the government’s classified networks through a $200 million contract awarded by the DoD to Anthropic, but the company later sought guarantees that its tools would not be used in domestic surveillance or autonomous weapons. The Pentagon had demanded that the military be allowed to employ the technology for any lawful use.

In a Friday memo seen by FT, Amodei reportedly told staff that near the end of negotiations with the Defense Department, it had offered to accept Anthropic’s terms if they deleted a “specific phrase about ‘analysis of bulk acquired data'” — a line he said, “exactly matched this scenario we were most worried about.” 

Amodei also wrote in his note that messaging from the Pentagon and OpenAI, which struck a new deal with the Defense Department on Friday, was “just straight up lies about these issues or tries to confuse.  

The timing of OpenAI’s deal with the Pentagon, announced within hours of the White House decrying Anthropic, had caused a backlash from people, with Anthropic seeing a surge of app downloads while ChatGPT reportedly saw app uninstallations surge.

OpenAI CEO Sam Altman later said that his company “shouldn’t have rushed” its deal and outlined revisions to its own safeguards with how the Defense Department can use its technology. 

In a post on X, Altman further addressed the controversy, saying: “In my conversations over the weekend, I reiterated that Anthropic should not be designated as a [supply chain risk], and that we hope the [Department of Defense] offers them the same terms we’ve agreed to.”

Anthropic was founded in 2021 by a group of former OpenAI staff and researchers, who left the firm after disagreements over its direction, with the company marketing itself as a…

Most U.S. Federal Reserve officials agreed to hold interest rates at its January meeting — but were divided on monetary policy path going forward, according to meeting minutes released Wednesday. Some thought supporting the labor market should be prioritized over controlling inflation. That is to say, there were disagreements over whether rates should be kept steady or even hiked if inflation doesn’t go down.

Traders think there’s a roughly 50% of the Fed cutting rates in June, according to the CME FedWatch tool. Perhaps they should start considering the possibility of higher interest rates, too.

In the markets, major U.S. indexes rose Wednesday, supported by tech stocks. Nvidia shares rose after Meta Platforms announced Tuesday a deal that will see it using the chipmaker’s next-generation systems. Amazon climbed 1.8% and snapped a nine-day losing streak that cost it over $450 billion in market cap.

Oil prices jumped more than 4% after U.S. Vice President JD Vance said Iran is “not yet willing” to acknowledge certain “red lines” demanded by Washington. In light of this, the U.S. is not taking military force off the table, Vance added.

Meanwhile, India is hosting the AI Impact Summit, which will be attended by business leaders such as OpenAI CEO Sam Altman and Alphabet CEO Sundar Pichai.

Some highlights from the event include Adani planning to invest $100 billion in AI data centers in India and Mistral AI CEO Arthur Mensch saying more than 50% of enterprise software could be supplanted by AI. While Nvidia CEO Jensen Huang pulled out of the event at the last minute, the company announced on Wednesday a partnership with venture capital firms in India to fund AI startups.

Last, catch the Reserve Bank of New Zealand Governor Anna Breman in an exclusive interview with CNBC’s “Squawk Box Asia,” where she’ll be discussing the country’s inflation forecasts and whether the central bank could hike rates — just as some Fed officials seem inclined to.

— CNBC’s Jeff Cox, Sean Conlon and Pia Singh contributed to this report.

Nvidia sells entire stake in Arm, according to the chip giant’s filing to the SEC on Tuesday. Nvidia had held shares in Arm since 2023, but wound down the size of its stake toward the end of 2024, according to past documents filed with the SEC.

U.S. tech companies should “worry a little bit” about the subsidies their Chinese competitors receive from their government in the AI race, Microsoft President Brad Smith told CNBC, even as America has an advantage in terms of chip power.

Figma reports third-quarter earnings and quarterly guidance that beat Wall Street expectations.

Oil prices rose 3% on Wednesday, after Vice President JD Vance said Iran did not address U.S. red lines in nuclear talks this week and President Donald Trump reserves the right to use military force.

U.S. crude oil rose $1.99, or 3.19%, to $64.32 per barrel by 10:09 a.m. ET. Global benchmark Brent was up $2.04, or 3.03%, to $69.46 per barrel.

U.S. envoys Steve Witkoff and Jared Kushner held nuclear talks with Iran in Geneva on Tuesday. Iran’s Foreign Minister Abbas Araghchi described the discussions as “constructive,” according to Iranian media. Araghchi said the talks yielded a general agreement on guiding principles.

Oil prices closed lower Tuesday as traders interpreted the foreign minister’s comments as a sign that the U.S. and Iran could still reach a settlement.

But Vance said Tehran had failed to address core U.S. demands.

“In some ways it went well, they agreed to meet afterwards,” the vice president told Fox News Tuesday evening. “But in other ways it is very clear that the president has set some red lines that the Iranians are not yet willing to actually acknowledge and work through.”

Trump reserves the right to use force if diplomacy does not succeed in stopping Iran’s nuclear program, Vance said. “We do have a very powerful military — the president has shown a willingness to use it,” the vice president told Fox News.

Sources told Axios, meanwhile, that a U.S. military campaign against Iran would likely be massive, last weeks and look more like a full-fledged war than the raid that captured Venezuelan President Nicolás Maduro in January.

Iran’s Revolutionary Guard conducted war games this week in the Strait of Hormuz, a vital trade chokepoint for global oil flows. About one third of all waterborne crude exports pass through the narrow waterway, according to data from energy consulting firm Kpler.

The oil market is worried those oil flows would be disrupted if the U.S. and Iran go to war. Iranian state media said traffic in part of the strait was closed Tuesday due to the military exercises.

Trump has stationed the USS Abraham Lincoln aircraft carrier in the Middle East. The USS Gerald Ford is en route to the region.

Trump said Friday he depoyed the second aircraft carrier in case negotiations fail. “If we don’t have a deal, we’ll need it,” the president told reporters outside the White House.

OKLAHOMA CITY — Amazon and Nvidia told a room of oil and gas executives this week that all options are on the table to power artificial intelligence including fossil fuels such as natural gas.

The tech and energy industries gathered in Oklahoma City at the Hamm Institute for American Energy to discuss how the U.S. can meet the growing energy needs for AI data centers. 

The Big Tech companies have invested mostly in renewable power in an effort to slash their carbon dioxide emissions, but they are now navigating a changed political environment. President Donald Trump has ditched U.S. commitments to fight climate change as he seeks to increase fossil fuel production, particularly natural gas.

There is now growing public acknowledgment from the tech industry that gas will be needed, at least in the near term, to help fuel AI.

“To have the energy we need for the grid, it’s going to take an all of the above approach for a period of time,” Kevin Miller, Amazon’s vice president of global data centers, said during a panel discussion Thursday. “We’re not surprised by the fact that we’re going to need to add some thermal generation to meet the needs in the short term.”

Amazon remains focused on slashing its carbon emissions, Miller said. It is the largest corporate purchaser of renewable energy and is investing in advanced nuclear and carbon capture technology to reduce the environmental impact of its energy consumption, the executive said.

But those advanced technologies will not come online until the 2030s and Amazon needs steady and secure power now, Miller said.

“We’re very explicit that meeting customers’ demands for capacity is first and foremost in our priority list, and so having access to power is first and foremost what we focus on,” Miller said. “And we have a goal to be net-zero carbon as a company by 2040 and are very focused on that.”

Nvidia is also focused on environmental impact but wants “all options on the table” as AI faces an energy crunch, said Josh Parker, the chipmaker’s senior director of corporate sustainability.

“At the end of the day, we need power. We just need power,” Parker said at the panel. “We have some customers who really prioritize the clean energy, and some customers who don’t care as much,” the executive said.

Anthropic co-founder Jack Clark called for data center developers to be realistic about the energy sources that are currently available. Anthropic estimates that 50 gigawatts of new power is needed by 2027, equivalent to about 50 nuclear reactors. AI demand can help drive the development of “new and novel sources” of power over the longer term, he said.

The idea of using coal, however, was met with unease. Trump recently signed an order that aims to boost coal production, citing demand from AI. The Amazon and Nvidia executives did not answer directly when asked during the panel whether they thought coal had a role play in powering AI.

“You have a broader set of options than just…